The move gives corporates the flexibility to go ahead with mergers without facing legal hurdles, if they do not fall under the commission’s criteria.Domestic companies eying overseas buyouts can tap opportunities without threat from the Competition Commission of India (CCI) looming large.
The draft regulations to implement Competition Act have proposed that a merger and acquisition notification would be required only in instances where both acquirer and acquired have a turnover exceeding Rs 600 crore in the country. Besides, the regulations also propose that both the entities should have business presence in the country.
This, in effect, would mean acquisitions like Tata-Jaguar will not come under the commission’s lens. This would be an additional threshold limit over above the existing requirement of Rs 3,000 crore combined turnover of the entities involved, as prescribed in the Act. The move gives corporates the flexibility to go ahead with mergers without facing legal hurdles, if they do not fall under the commission’s criteria.
The commission — which has come out with draft regulations for implementation of various provisions of the Act — has also proposed that a promoter group involved in creeping acquisition would not be required to report the increase in stake, unless the move has led to a change in control. Also, in cases where an outsider is acquiring stake in a company, the commission approval may not be required if the acquisition is less than 15 per cent and does not result in change of promoter.
“The intent behind such a move is to harmonise the regulations with other existing regulations in the country,” Mr Vinod Dhall, Acting Chairman of the commission told Business Line. The commission would also allow acquisition of assets by corporates as it is an organic growth. Explaining this he said, “Only in case of assets where the market position is enhanced significantly, the corporate will be required to approach us.”
For example, buying a jet for personal use will not attract the provisions of the Competition Act. The regulations also stipulate that every merger, which comes under the purview of the commission, would be cleared in 30 days, failing which it would be deemed approved. “If a company does not hear from the commission it can deem it approved unless the commission feels that the proposed merger is likely to have an anti-competitive effect. In such cases a company would be served a showcause notice,” Mr Dhall said.
“The process and the time involved of issuing a showcause notice seeking more information is better than many other countries, including the US where the commission can put up a second request for information on a merger and acquisition,” Mr Dhall said.
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